Problematic Loan Portfolio overview

The new year is now in full swing and here is our first Problematic Loan Portfolio Overview of 2020.  Besides statistics for Q4, it also contains some important updates from the previous month. To date, crowdfunding has been able to operate in conditions of economic growth and no major crisis has yet occurred. However, by now the first platforms in Europe have gone bankrupt, the first investor money has been lost, and in the last few weeks, the first scams have emerged. So, it’s even more important to be aware of all the accompanying risks when investing and to exercise extra caution by carrying out diligent pre-analysis of the platforms and projects you choose when deciding to invest.

Being a market leader gives us extra responsibility to work closely with regulators in all of our operating countries and ensure that the sector is healthy and viable. Pan-European crowdfunding regulations should be in place by 2021 at the latest, at which time all the countries in the region will have the same conditions for registering and operating crowdfunding platforms. Until then, in Estonia, the sector is self-regulated by the Crowdfunding Best Practice, which complies with the European regulation principles. The purpose of Crowdfunding Best Practice initiative is to assist market players with effective self-regulation and to bring trust and transparency to the sector. EstateGuru also has a Best Practice Label from FinanceEstonia.

EstateGuru loan portfolio

As of today, EstateGuru has financed 1246 loans since 2014, exceeding the amount of €180M, of which 560 loans exceeding the amount of €87M have been paid back to our investors successfully.

Currently, there are 21 unique projects and 42 defaulted loans (in different loan stages) to the value of €6,4M in EstateGuru’s problematic loan portfolio.

There are no significant changes in portfolio structure by country – Estonia still accounts for most of our loan defaults (as the total portfolio is the largest), followed by Latvia. No loans have currently defaulted in any of the other countries where we operate.

Recovered loans

No capital loss occurred to our investors in Q4 of 2019 or in January of 2020. Our current actual average return rate for recovered loans is at a level of 10,9%. From the date of declaring the loan defaulted, we recoup investors’ money in five months on average.

During Q4 of 2019 and the first month of 2020, our recovered loans number increased from 11 to 17. Our total recovered loan amount has reached €3,2M, of which €0,6M worth of loans were recovered during the last two months.

Open communication

In addition, we’ve received information from the bailiffs that as of 31/01/2020 the collaterals of four defaulted loans have been sold at auctions in Estonia and Latvia. We are now busy with the official procedural process during which the paid sums will be transferred to the collateral’s agent, and from their account to our investors’ accounts. Regarding those four defaulted loans, no capital loss has occurred and the precise return rate will be calculated after the deduction of the costs related to the procedural process and other accompanying costs.

The work continues and our whole risk team is striving to make the recovery process outcome as fast and rewarding as possible for our investors. The risk team, together with country heads and real estate partners are actively searching for buyers for our defaulted loans’ collaterals. Also, our legal department together with the collaterals’ agent law office and our local partner law offices are actively and successfully representing our investors in different litigation processes connected to defaulted loans.

As we are more than a public company, we have improved our communication (including loan updates) regarding defaulted and late loans. Investors should expect an update about a defaulted loan on our platform at least every 35 days.

According to the latest statistics, problematic loans account for 6,9% of the total loan portfolio. We are working on getting this to a maximum of 5% by the middle of the year.

We will deliver the next quarterly report to you in April 2020.

Table 1: Statistics